Social Security As A Stimulus

Click on the title and you'll read of a suggestion to suspend Social Security taxes for a month as an instant stimulus for the staggering economy.

George Loses It As He Watches His Nation Falter

Ireland's Economy Is Running Out Of Luck

Ireland, recently considered the Gaelic Tiger because of its unparalleled economic growth, is now one of the world's most floundering economies. As recently as 2007, the Emerald Isle was measured to be the 12th wealthiest nation per capita, positioned ahead of the U.S.. Now it's credit rating has been reduced, tax revenues are expected to fall by 20% and the deficit is 11% of GDP (three times what the EU allows). They are attempting to spend their way out of this recession but the loss in credit rating will make it more expensive to borrow adding to the cost of repayment.

Rapture Index

America's evangelicals have comprised their own crisis index to correlate a variety of worldly events with the likelihood of the end of our planet. There is an interesting connection between the recent housing crisis and the financial well-being of devout Christians. Areas of the country with heavy concentrations of evangelicals didn't experience anything close to the bubbles in housing occurring elsewhere. Conversely, it was discovered that housing spikes in these areas were much more common in the period shortly after 9/11. This may indicate a different philosophy toward worldly possessions compared to more secular folk. The reason to consider this more than just a statistical quirk is that conservative Christianity teaches followers that God owns all worldly possessions. In practice, that means that unchecked greed and speculative frenzy are seen as undesirable in the evangelical community. Looking at home prices before and after 9/11 it's discovered that they fell sharply in non-evangelical areas but actually rose in evangelical ones. There is also a clear parallel between the movements of the Rapture Index and home prices. If you read through the current data and compare the totals to the key at the bottom, the index tells us that we better "fasten our seat belts". Click on the title of this posting to access the Rapture Index. This is meant to be nothing more than an objective observation of the beliefs of a segment of our population.

Might This Be The Final Nail In The Coffin Of Your Cigarette Habit?

On Wednesday, the largest federal cigarette tax increase in history will go into effect. All tobacco products will see significant increases as the government finds new revenues to pay for rising health care costs. Click on the title to read more about the impact on consumers and suppliers.

South Park On Financial Policy

Click the title for a segment, the entire episode can be accessed at the end.

Is All Of This Stimulus Good For America?

From The Ayn Rand Center for Individual Rights: Obama’s Backward Economics by Yaron Brook.

“Barack Obama claims that Americans can only stave off economic disaster by trillions in government spending--which means trillions of dollars taxed or borrowed to finance government make-work programs,” said Yaron Brook, executive director of the Ayn Rand Center for Individual Rights. “Obama-nomics couldn’t be more wrong. “Prosperity requires that the government drastically cut government spending. That way, as much real capital as possible will remain in private hands, and be put to productive use by entrepreneurs to create valuable goods and services to sell at home and abroad. By taxing and inflating our wealth away, Obama will simply be creating more of the crushing debt that brought about the current crisis.”

Contemporary Hoovervilles Popping Up Across The U.S.

Reminiscent of the 1930s shanty towns, tent cities are being erected from California to the Tampa, FL area. Though not the shelters of cardboard history describes to us, people recently evicted by the mortgage debacle find themselves in a constant Coleman moment living outdoors in their camping gear. This is a stark reminder of the severity of the crisis and the swift impact on the recently middle-class. Click the title above to read more about this revival.

Two Views On The Legalization Of Marijuana

Prohibition creates violence because it drives the drug market underground. This means buyers and sellers cannot resolve their disputes with lawsuits, arbitration or advertising, so they resort to violence instead. Violence was common in the alcohol industry when it was banned during Prohibition, but not before or after. Violence is the norm in illicit gambling markets but not in legal ones. Violence is routine when prostitution is banned but not when it’s permitted. Violence results from policies that create black markets, not from the characteristics of the good or activity in question. The only way to reduce violence, therefore, is to legalize drugs. Fortuitously, legalization is the right policy for a slew of other reasons.
Prohibition of drugs corrupts politicians and law enforcement by putting police, prosecutors, judges and politicians in the position to threaten the profits of an illicit trade. This is why bribery, threats and kidnapping are common for prohibited industries but rare otherwise. Mexico’s recent history illustrates this dramatically. Prohibition is a drain on the public purse. Federal, state and local governments spend roughly $44 billion per year to enforce drug prohibition. These same governments forgo roughly $33 billion per year in tax revenue they could collect from legalized drugs, assuming these were taxed at rates similar to those on alcohol and tobacco. Under prohibition, these revenues accrue to traffickers as increased profits. The right policy, therefore, is to legalize drugs while using regulation and taxation to dampen irresponsible behavior related to drug use, such as driving under the influence. This makes more sense than prohibition because it avoids creation of a black market. This approach also allows those who believe they benefit from drug use to do so, as long as they do not harm others.

Despite this compelling argument from an economic point of view, most Americans feel strongly against legalizing marijuana even if it could be taxed, as well as lowering the drinking age.

MARIJUANA SHOULD BE…
Legal 31%
Legal, if taxed & money used for projects 7%
Illegal, even if it could be taxed 58%

SHOULD DRINKING AGE BE LOWERED TO 18, IF THAT WOULD FREE UP POLICE TO DEAL WITH OTHER CRIMES?
Yes, lowered 24%
No, kept same 73%

Of all age groups, the strongest support for lowering the drinking age comes from those under age 30, but even most of them (six in ten) are still opposed. Of all other age groups, eight in ten are opposed.

The Anti-Mommy Bias

Most jobs today, whether you're a teacher or running the Office of Homeland Security, require more hours than ever. The stresses are greater and even though we have all of these wonderful devices that free us from being chained to a desk, they make us more available. Many people believe that to fill some of these high-flying jobs you basically need to have no life. Because of this perception, women with children are regularly passed over for promotions for fear that the family time will cut into workplace productivity. This has created a specialized glass-ceiling that stops ambitious women with children from ascending beyond certain levels at work. As such, some now cite an institutional anti-mommy bias. Click on the title above to read more revelations about this concern.

Government's Debt Auction Disappoints

The government tried to sell bonds yesterday to raise needed capital for the season of bailouts, but there was a very lukewarm response. Some interpret this to mean that there is nervousness (verbalized last week by the Chinese Premier) that America is becoming a risk. The Treasury ended up having to pay higher rates of interest because the slim demand caused bond prices to fall. But another economist had a different take on it stating that the fact that rates are rising is very good news, not bad news. It means that banks and investors are finally moving the vast sums they are sitting on out into the economy to finance consumption and investment — exactly what we want to happen. What weighed on speculation was an equally bad bond auction in London. Click on the title above to read more about this essential tool to finance our short term plans.

Robbing Peter To Pay Paul?

One of President Obama's measures to raise revenue is to limit the deductibility of charitable contributions made by our wealthier citizens. The concern is that this will have the perverse effect of being a tax on charities. Will wealthy people reduce their giving to pay for the additional tax? Click on the title above to read more about the concern.

Saudi Women Launch Lingerie Shop Boycott

Because of one of the more ironic twists of life in Saudi Arabia, women in that socially conservative country are staging a very public boycott. In this Middle Eastern kingdom women can not sit down and have coffee with a man who is not a relative. But if a woman needs to shop for undergarments she will only find male clerks to answer her most intimate questions. The result has been a completely uncomfortable experience for the women who often feel violated. Click on the title to get a glimpse of the unintended consequences of gender segregation in this mysterious country.

What's In Your Wallet? The Next Ticking Time Bomb

It only makes sense, people struggle to pay their bills and they turn to their credit cards to begin paying essentials. Put that on top of the already seething cauldron of consumer debt and you have the potential for the next bubble burst. Click on the title to read about the speculation worth watching.

Ethiopia Runs Out Of Coca-Cola

Africa, in general, has been spared from the mortgage meltdown ravaging other nations. But it doesn't mean that they've avoided the effects of the backlash. A decline in foreign investment and trade has left the nation of Ethiopia with a currency crisis. The drought of foreign currency has made it difficult for the struggling nation to purchase the things it doesn't make at home. Coca-cola has been a staple for most Ethiopians since the first bottling plant opened in 1959, but now the nation's beverage shelves are bare. It's not that there isn't plenty of the cola and bottles to put it in, the problem is there are no tops. The nation has run out of the spongy rubber material necessary for the lining of the cap and it's brought production to a standstill. The result has been a devastating impact on employment in the nation as it is estimated that tens of thousands of jobs are related in someway to the bottling, delivery, and distribution of this iconic drink. Click on the title above to read a brief article on the effects.

Is The NCAA Evil? The Real March Madness

Top-level college sports is big business, but very little of this flows to the student-athletes. Ohio State, for example, receives about $110 million in revenue each year from ticket sales, television rights, concessions, parking, logo sales, etc. -- over one-fifth of what it receives in tuition revenue from its more than 50,000 students. And its basketball players are paid about $29,500 each.
In a competitive market, companies cannot exploit workers in this way for long, as rival firms will hire them away at higher salaries. In basketball, however, the NCAA cartel prevents that, dictating limits on pay (essentially college costs) and even penalizing transfers to other schools. Strict rules also prevent college athletes from signing lucrative endorsement deals or accepting gifts beyond a certain amount....
If all of that money from ticket sales and television rights isn't going to student-athletes, where does it end up? In 2006, salaries for coaches and administrators accounted for nearly 32% of total athletic-department expenses. Many head football coaches at top universities earn five times the salary of their university president. At a time when most schools are tightening their belts with salary freezes, staff layoffs and the like, the University of Tennessee just announced it was going to start paying two assistant football coaches $650,000 or more each (the head coach makes $2 million). Jim Calhoun, head coach of the University of Connecticut men's basketball team, recently made headlines when he launched into a tirade at a blogger who questioned his $1.6 million annual compensation. Those high salaries are financed from the talents of unpaid student-athletes. (Talk about income inequality.) So not only are the young being exploited, but the exploitation is being committed by their adult mentors....
Of course, for the students who go on to the pros, putting off their financial bonanza won't be a big deal. But most college athletes do not make the pros. They may not even end up with the basic skills necessary to succeed in other workplaces, since only a minority of student-athletes in major sports even graduate (25% in top-ranked University of Connecticut men's basketball, for example). Long practices and missed classes make it difficult to succeed academically. A recent study funded by the Andrew W. Mellon Foundation shows the academic performance of athletes is lower than non-athletes even at Division III schools.

Sweden Says No To Saving Saab

General Motors subsidiary Saab heard the knell of death today as the Swedish government refused to bail out the iconic brand claiming disinterest in owning a car company. GM began it's gradual control of Saab in 1990 and had full ownership a decade later. The closing of the company would cause the immediate evaporation of 4500 jobs in southern Sweden as well as thousands of additional jobs among the suppliers. The government puts the blame squarely on GM for its lack of innovation and for building vehicles no one wanted to buy. Click on the title above and witness the nails being driven into the coffin.

What Choice Do We Have?

Our economy has its back to the wall. We have 47 million Americans without health care, we've lost huge chunks of the manufacturing sector and with it many middle-class jobs, our country depended on the financial industry to be the driver of growth and that is no longer an option, we've depended on the consumer and the false sense of wealth to continually fuel the engines but that well is now dry. Joseph Schumpeter's vision of capitalism popularized the term creative destruction as the creator of growth. Yet, most of our finest minds went into the financial industry and made it a hot bed of innovation. It was this misguided entrepreneurial laboratory that would ultimately destroy too much. The government's stimulus has to create the incentives to redirect our human capital to developing something more sustainable. As Schumpeter stated, without the perpetual cycle of innovation capitalism will die and so will our way of life. With all of this on our plate, how can the government not spend tons of money in the coming years? Had we nurtured the surpluses of bygone budgets, we would have been well ahead. Had our leaders found the backbone to tackle entitlement issues 15 years ago, we wouldn't have the spending projections recently published by the CBO. Had there been greater oversight of the financial industry over the last 25 years, we wouldn't be burdening the next generation with the bills it will face. Honestly politicians...what choice do we have?

What Does It Mean To Be Presidential?

First of all, it's a relief to no longer feel embarrassment over my President (I've just begun capitalizing the word again). The last eight years were dominated by a White House of secrecy, lies, divisiveness, unilateralism, duplicity, disregard for the Constitution, and disdain for the diversity of public opinion. The image of the presidency was a rat-faced, small-minded man with the dimensions of cardboard and a vision of the world that brought us to the precipice of our demise. I can now look at the man in the White House and not cringe. I can listen to him speak without sensing the abrasiveness of nails on a chalkboard. I can measure my faith in his words and actions, and share his journey through the transparent vehicle he has chosen. Yes, the willingness to be a visible and unorthodox President can expose a misstep or two. But, I'm sure we want a human President. I'm sure we want a President who embraces the American culture. I'm sure we want a President who is flexible with the times. I am a teacher, do we envision a teacher today as someone who stands firmly at a chalkboard while lecturing kids in perfect rows to a state of somnolence? If you are not relevant to your students, it's a lost cause. I've evolved and tweaked my approach persistently so that my message never gets lost in the translation. The President has to shape his office to the people he serves, not vice versa. If he doesn't the people will tune out any translation. This is not your father's President and I'm alright with that.

Congress Pops Off

A fundamental flaw with our democracy has been revealed this week. The Congress has been engaged, connected, vibrant, energized, and angry over the proposed "bonuses" being doled out by bailout recipient AIG. In world-record time they've passed a 90% tax assessment on these payouts and grilled the hapless CEO over the proverbial coals. All in the name of saving the taxpayers $160 million. Hmm, wouldn't it be wonderful if they exerted such energy over something that really mattered like Social Security, the wars, Medicare, global warming, job growth, or curing the common cold? The tragedy is that politicians know how to latch on populist ideas and are willing to take strong positions with fiery rhetoric. But they sit aimlessly on the fence with all of their spineless cohorts when it comes to tackling the issues that will guide the course of our existence as a viable nation. If I were a younger person at this moment in history, I would be livid.

Duke Basketball Coach Slams Obama

Hurt by the fact that Duke didn't make President Obama's highly publicized Final Four picks, Coach Mike Krzyzewski says, "the economy is something that [the president] should focus on, probably more than the brackets. Obama chose Blue Devil rival North Carolina instead.

The Secrets of the Wizard of Oz

Did you know that the Wizard of Oz was an allegory about the Populist Movement in the U.S. in the late 1800s? It is also an Economics lesson in what can happen if the money supply is allowed to contract and deflation plagues the country. Much can be learned about today's crisis by clicking the title above and reading the article.

The Fed Engages In A Little OMO.

As anticipated, the Fed disclosed that it will purchase $300 billion in Treasuries to add liquidity to the economy and purchase $750 billion worth of those nasty mortgage bonds to free up the banks for lending. Over $1 trillion in commitments did much to dash people's confidence in the dollar as it closed at a two-month low today. Despite gloomy revelations in the Fed minutes, the stock market loved the ambitious plan and had another positive day.

Jay Leno Flunks Economics

1. Comedian Jay Leno takes his show to Michigan to help "not just the autoworkers -- anybody out of work in Detroit."

2. He gives away tickets for free.

3. Someone tries to sell his ticket on ebay.

4. Mr Leno objects.

So I wonder: If a person down on his luck prefers the cash to the opportunity to watch Leno live, why would Leno object? Is it altruism that is really motivating Leno here? Is he really sure that the unemployed person in Detroit would be better off with an evening of laughs than $800 in his pocket? Or does Leno want to play to a live audience of unemployed workers so he will seem altruistic to his television audience?

Absent externalities, markets improve the allocation of resources. Both the buyer and the seller of the ticket must be better off: otherwise they would not engage in the transaction. The only significant negative externality that I can see here falls on Mr Leno himself. In other words, Leno's objection to the ebay sale is an understandable and fundamentally self-interested act in that the sale impedes his abilty to appear selfless.

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Bernanke Is Interviewed On 60 Minutes

This is an unprecedented event, the Fed Chairman never accepts interviews. With uncharacteristic frankness, Ben Bernanke expresses his optimism and exasperation over the current crisis. This is not only an introduction to the man but also the office and the incredible tools at his disposal to combat this monumental problem. Viewing the two part presentation will go a long way in satisfying the pop quiz event this Friday.

The Germans Pay Homage To Our President And Our Cuisine

Glossary of Fed Terms

Click on the title for a quick review of some of the more important Fed terminology. I anticipate a pop quiz on Friday.

I Wouldn't Do It If I Were You, Wolf. Bacon Could Kill You, Sooner Than You Think.

Click on the title to read an editorial trumpeting the concerns I aired in class recently. In the name of profit maximization, our livestock industry is regularly pumping antibiotics into perfectly healthy animals as a precaution. As we ingest the food and antibiotics, their potency to fight disease in our bodies diminishes and viral strains develop that are immune to them. MRSA is an example that has killed 18,000 in the last year; more people than have died from A.I.D.S..

Would You Lend Money To This Guy? China Is Worried About Their Investments In The U.S.

Click on the title to read about the latest wrinkle in global finance. It's estimated that China has lent us over one trillion dollars and now they're worried that our new borrowing to stimulate the economy will make it difficult to meet our repayment obligations.

Stewart vs. Cramer

Click on the title to view the full episode of Jon Stewart's March 12th interview of Jim Cramer. Cramer hosts a show called "Mad Money" on the cable business channel CNBC. He promotes himself as an expert in the ways of the market and investing and has gathered a huge following over the years. In a frenetic format he tells people to buy and sell stocks and provides information while throwing chairs and stuffed bulls. Stewart contends that the station lost its journalistic objectivity and became a shill for Wall Street. Consequently, instead of warning viewers of the very conspicuous signs of collapse, the commentators continued to promote optimism. I haven't taken Jon Stewart too seriously in the past, though he is funny and insightful. But, this was a step up as he was relentless in questioning Cramer into submission. In defense of Cramer, he is just one voice (though the most prominent) on that channel and only a fool invests his hard earned money based on the view of one opinion. The interview is about 20 minutes long.

Slow Down, You Move Too Fast

Click on the title and discover evidence of the "slow" revolution. The era of fast food manufactured for mass consumption and maximum profits has resulted in a crisis of confidence in our food industry. The massive money machines of Wall Street with their slice and dice mortgage bundles and exotic derivatives created to simultaneously confuse and entice the world's investors has led to a crisis of faith in our money markets and banks. Read about what happens when "slow money" meets "slow food" and the needs of a small organic dairy farmer and his loyal customers are met.

What Should Be The Tax On A Cow's Fart?

Irish and Danish farmers are protesting a new proposal to tax livestock for their contributions to carbon emissions and greenhouse gases. Farmers are threatening to move their livestock to South America. Click on the title to read this article.

Domestic Violence Is On The Rise

I'm going to admit that I have never paid any attention to most of the current pop music stars. I find their work redundant and the music nothing more than a contrived formula. I am aware of two things though, Chris Brown and Rhianna are the specials on today's menu and he had a field day on her face in the back of a limo on the way to the Grammys. He punched, slammed, kicked, and bit her according to medical examinations. I did't know anything about them before this incident but regardless of anything, any man who physically, verbally or emotionally abuses a woman should be shunned from society. It doesn't make any difference what type of person she is or whether she uttered provocative words, you don't hit a woman. There are many things connected to this incident that are troubling. First, she seems to have forgiven him and is returning. According to the experts, that isn't so surprising, for it's been found that 8 in 10 women return to their abuser. A statistic difficult to digest is that domestic abuse cases involving teenagers are on the rise. I'm confused on many fronts. I was under the impression that this generation was evolving and shedding the unsightly chauvinism of my generation. Teens are supposed to be more tolerant than in the past. I am quite aware of the progress young women are making with the opportunities this enlightened world has offered. Young women dominate the honors courses, run student government, are excelling at sports, are entering college at a rate that makes admissions officers discuss male affirmative action, and have embraced their emancipation. This would make me believe that they are more self-assured and wouldn't tolerate an abusive boy. Women can stand on their own two feet and have proven that it may now be their turn to lead. The response among men may be to manifest their insecurities with this new paradigm by lashing out, but why are young women still taking it? Young women today have more power than they can imagine and can very easily diminish the men who aren't buying it. Don't enable abusers, reject them. By the way, a complete boycott of Chris Brown would be a great first step.

How To End the Drug War, Legalize?

The editors of The Economist magazine belive that legalizing drugs is the least bad solution. Click the title to read.

The Debt is a Dirty Bomb

Clicking on the title will take you to an article from the former Comptroller of the U.S. David Walker. He has been an outspoken critic of the disregard shown toward the burdens placed on future generations by today's reckless government spending. As you might imagine, he is even more so now. Lost in the rush to stimulate the economy are the undeniable costs of a massive financial infusion by the federal government. We are running a trillion dollar deficit currently and we're anticipating an even greater one for 2009. There are unfunded mandates hanging out there, and both Social Security and Medicare problems that have been placed on the back burner. We are committing ourselves to a ramp up in Afghanistan and to a serious overhaul of the health care system. Meanwhile, the revenue estimations for the next ten years have to be muted to be taken seriously. There is hope being held out that a new paradigm has been realized and Americans will be more conservative spenders in the future. So, unless we have a serious "green" revolution that spurs investment and employment on the supply-side, future growth prospects will be limited. Consequently, the burdens on the youth of today, when the future arrives, will derail any hope of achieving the standard of living their predecessors enjoyed.

Down With Facebook!!!

Click on the title to view the opinions of the last remaining human being without a Facebook page.

Where Is Our Radical Youth?

Click on the title for an article that questions where today's angry and disillusioned youth are. I have to raise the question, where is any anger? Like "soma", we have swallowed the pill of complacency. Immersed for years in a mesmerizing haze of consumerism as we distanced ourselves from the leadership in Washington. As long as the credit cards kept underwriting our private needs and demand for public goods was met without much sacrifice, we were satisfied to let the aliens inside the beltway fight their intraplanetary squabbles. We're all guilty of burying our heads.
Young people don't demonize their parents now days, families today are a committee of equals. Hierarchy has been eliminated, everybody is each other's best buddy, the umbilical cord in all its electronic forms tethers the helicopter parent to the child. The child is awarded adult status from the beginning so never needs to rebel against restraints. The parent renews their identity through the child and you end up with a nation of pleasantly incestuous cliques, living in cookie-cutter McMansions, throughout identically commercialized towns. Where can the seeds of rebellion find any nourishment to grow in that climate?

Drug Legalization Is Not The Answer

Click on the title to access one man's opinion on the idea of being more permissive with our drug policies.

What Are the Odds of a Depression?

Click on the title and access a thoroughly researched hypothesis on the chances of a depression.

Today I Am Afraid

I jumped the fence today, acquired my own personal cloud over head, and realized my glass is actually half empty. Today the fingernail that was connecting me to the end of the hope rope broke. I am now officially frightened of what is ahead. The market sensed it also, as today was a brutally ugly day, gobbling up yesterday's aberration and spitting it out all over a big pile of losses. The FDIC has now declared itself teetering and was forced to draw blood from the thoroughly letted banks. It seems the 40-50 bank failures over the last year coupled with the commitment to insure up to $250,000 has placed our remaining security blanket near the fire. I am now readying the Sealy-posturepedic and booby trapping my cookie jar.
If the government doesn't nationalize the banks soon, we will fall into the abyss. They will take over a lot of fictitiously valued assets and in the long run undoubtedly lose money. But to wait and let the system slip into a coma will be devastating and the draining of confidence will be difficult to recapture. Market economics has been benched and anybody who still decries the role our government must take is a blind ideologue.

Canada: Number One Banking System in the World

Click on the title to read an article about the solvency of our northern neighbors.

Charting Our Shrinking Economy

Click on the title above to access an evaluation of the recent GDP numbers released last Friday. The article includes several diagrams that help visualize the contraction.

Undergraduate Economics enrollment surges

Click on the title to access an audio clip from NPR on the volume of undergrads choosing Economics as their major.